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Chapter 3 PUBLIC PROCUREMENT SYSTEMS: A COMPARATIVE STUDY OF IRELAND AND SAUDI ARABIA Dhafer Al Ahmari and Paul Davis I. INTRODUCTION Public procurement forms are seen as a critical component that has a direct impact on the economy of any government which, involves ‘the acquisition of goods or services by public sector organisation’ and classifies as a key economic activity for a government (Thai, 2008). Moreover, Piga and Treumer (2013) elaborated that procurement is a valuable public policy tool which could help to achieve economic outcomes. Nijboer, Senden, and Telgen (2017) added public procurement is generally seen as an objective of achieving government policy. Knight et al (2012) discussed that the process of public procurement entails four key fundamentals which are procurement regulation, policy- making, procurement authorisation and appropriation as well as public procurement processes and function in operation. There are numerous challenges associated with the procurement system such as manipulative setting of bid qualification, unqualified applicants and selection of inappropriate methods for evaluation of bid (Hackett, 2016, p. 155). Therefore, the tender award criterion (qualification and evaluation) influences the success of the project. However, For effective procurement system, it is vital to ensure a competitive environment with the perspective of achieving best outcomes (Hanak & Muchova, 2015). Public Procurement can be defined as the steps by which government agencies purchase goods and services from the private sector. This procurement is conducted at national and regional levels, and there are generally a specific set of policies and laws governing

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Page 1: Chapter 3The budgeting, planning, accountability and implementation of public expenditure drive the economy and efficiency (Hanak & Muchova, 2015). Transparency applies to all instruments

Chapter 3

PUBLIC PROCUREMENT SYSTEMS:

A COMPARATIVE STUDY OF

IRELAND AND SAUDI ARABIA

Dhafer Al Ahmari and Paul Davis

I. INTRODUCTION

Public procurement forms are seen as a critical component that

has a direct impact on the economy of any government which,

involves ‘the acquisition of goods or services by public sector

organisation’ and classifies as a key economic activity for a

government (Thai, 2008). Moreover, Piga and Treumer (2013)

elaborated that procurement is a valuable public policy tool which

could help to achieve economic outcomes.

Nijboer, Senden, and Telgen (2017) added public procurement is

generally seen as an objective of achieving government policy. Knight

et al (2012) discussed that the process of public procurement entails

four key fundamentals which are procurement regulation, policy-

making, procurement authorisation and appropriation as well as

public procurement processes and function in operation.

There are numerous challenges associated with the procurement

system such as manipulative setting of bid qualification, unqualified

applicants and selection of inappropriate methods for evaluation of

bid (Hackett, 2016, p. 155). Therefore, the tender award criterion

(qualification and evaluation) influences the success of the project.

However, For effective procurement system, it is vital to ensure a

competitive environment with the perspective of achieving best

outcomes (Hanak & Muchova, 2015).

Public Procurement can be defined as the steps by which

government agencies purchase goods and services from the private

sector. This procurement is conducted at national and regional levels,

and there are generally a specific set of policies and laws governing

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56 AHMARI & DAVIS

the procurement process. On average, 10-15% of a country’s GDP1 is

spent on public procurement (WTO, 2018). Therefore, the

government has systems in place to make sure that this process is

carried out smoothly and in a cost-effective manner. However, these

Procurement systems are different from one country to another as

“not all countries implemented their variant at the same time.This

means that there is more than sufficient opportunity for cross-country

learning: a country can learn from the experiences, of other

countries” (both good and bad experiences) when implementing

public procurement policies” (Nijboer, Senden, & Telgen 2017).

In this light, this paper comparatively analyses the public

procurement practices and awards of two countries, Ireland and the

KSA, allowing for deeper insight into the benefits and shortcomings of

the procurement systems in the modern world. Although other EU

countries could have been chosen, Ireland was chosen as it

translates the EU directives into law without any localisation or

changes. It is planned that through a comprehensive breakdown of

different processes and legal restrictions, a greater understanding

can be gained regarding which procedure is better under certain

conditions. The study will also attempt to gauge the lessons that can

be learned from Irish system.

The rest of this paper is structured as follows: The first section,

presents the literature involving global roles and practices of public

procurement at an international and European level along with an

overview of the procurement process and the value of money. The

Second section briefly explains the methods followed by the third

section which presents an overview of government expenditure and

compares the legal framework of Ireland versus KSA. In the fourth

section, a case study was presented for each country, analysing the

process, evaluation methods, and award criteria. In the fifth section,

the discussion follows up with an analysis of the case studies,

comparing and contrasting the similarities and differences among the

two systems. Finally, the last section sets out the study conclusion.

II. LITERATURE REVIEW

2.1. Global Public Procurement

Procurement denotes the process of acquiring goods, skills, and

services. This process is essential in both private and government

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CHAPTER 3 57

organisations, it usually considers several aspects, including supply

chain, budgeting, and payment, among other key factors (Flynn &

Davis, 2014). Also, public procurement involves multiple of activities

ranging from planning, choosing the proper procurement method,

awarding and managing contracts (Sofia & Mats,2017). Public

procurement “involves more than the procurement process alone”;

being a powerful tool to increase government efficiency, decrease

public expenditure and foster economies, its design must include

components such as, the strategy and policy of the organization,

methods” procedures” personnel, organisation and information (Thai,

2009).

According to Chen (2008), procurement as a policy tool helps the

government to achieve economic outcomes. Thus, government

procurement has been tipped as the key drive towards attaining

sustainable development for various global nations (Romodina &

Silin, 2016). One of the critical issues faced by the government is to

manage and monitor the contract with the contractor and therefore, it

is an ultimate government responsibility to set and enforce public

standards for stakeholders, defining the roles and responsibilities

(Lember, Kattel, & Kalvet, 2013).

According to OECD, global procurement practices devoted efforts

to ensure that public procurement activities and practices are

transparent as well promote equal and fair treatment. Moreover,

global public procurement should link public resources with intended

purposes. The behaviour and professions of procurement official are

in line with objectives of the organisation, Thai (2016) added the

systems of global public procurement should ensure public scrutiny

and promote accountability.

McCue, Prier, and Swanson (2015) elaborated that public

procurement framework consists of elements such as institutional

and legal framework, procurement execution capacity, procurement

tools and control system, anti-corruption practices, contract

management and evaluation system. These principles are reflected

through state’s public procurement legal framework based on the

legal and administrative system. Public procurement system chosen

especially for capital works plays a vital role in determining the

success of various projects. Love, Davis, and Baccarini (2010)

emphasises that it is only from selecting an appropriate procurement

system that aspects such as value for money, cost efficiency and

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58 AHMARI & DAVIS

quality can be achieved. Thus, it is imperative that a procurement

contract strikes a proper equilibrium between various elements that

are likely to affect project completion (Sofia & Mats, 2017)

2.2. Public Procurement Principles

Budak and Rajh (2016) described that a principle is known as “an

attribute to determine the nature of something, character or essential

characteristic” and internationally recognised principles of public

procurement are transparency, economy and efficiency,

accountability and competition. Bovis (2012) added that economy

and efficiency elaborate how procurement function contributes

through the best allocation of resources for better value of money.

The budgeting, planning, accountability and implementation of public

expenditure drive the economy and efficiency (Hanak & Muchova,

2015). Transparency applies to all instruments and ensures effective

governance of procurement policy. The factors such as publication of

procurement-related documents and regulations, advertising

requirements, timeframes and bid evaluation criteria are addressed

under transparency criteria (Saad, 2016).

Graells (2015) explained that competition ensures that procuring

entities can purchase works, services and goods that best fit the

needs of the market within the allocated budget. Competition for

procurement function point of view depicts the range of functions

such as procurement planning, open competitive methods,

specifications to promote competition and wide dissemination of

bidding opportunities. Finally, accountability enhances the

procurement policy effectiveness through avoidance of conflict of

interest, neutral specification, competitive procurement methods, bid

protest and review mechanism. The purpose of accountability

mechanism is to limit discretion in decision-making by officials,

enhance bidders’ participation and improve the procurement process

(Davis, 2014).

Governments all over the world have their own procurement

practices and national laws. An Important Government procurement

regulator at international level for example the WTO and European

level are briefly represented in the next subsections

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2.3. World Trade Organization

In 1981, number World Trade Organisation’s (WTO) members into

a multilateral agreement known as the Agreement on Government

Procurement (GPA). The GPA was designed to ensure open, fair and

transparent conditions of competition in the government market

markets and at present has 19 parties of 47 WTO members. Ireland

became one of GPA members 1st of January 1996 while Saudi Arabia

still not yet ready to join the agreement. The agreement does not

automatically apply to all public procurement activities of each party.

Only the procurement of goods and services that have a value that

has crossed the threshold value are covered by the agreement.

2.4. European Union

The European Union has for many years focused on a number of

public procurement reforms trying to lead less bureaucracy and

higher efficiency. The basis for this reform has been a comprehensive

system of legal directives.

2.4.1. Legal Framework

The European Communities Regulations SI No. 329 of 2006, the

European Communities Regulations SI No.50 of 2007, and the

European Union Regulations SI No 62 of 2012 has enabled the Irish

legal system to derive its national laws from the EU procurement

Directives 2004/18/EC, 2004/17/EC and 2009/81/EC (Bianchi &

Guidi, 2010). The key principles (Table 1) of the EU frameworks

underpin all procurement process and are the fundamental principles

under which procurement law is based.

On the 18th of April 2016, the European Union introduced three new

directives that the EU countries had to transpose into their national

laws. These new directives were aimed at simplifying the public

procurement procedure and make them more flexible for public

buyers and suppliers, especially SMEs. The Directives to be

introduced were, Directive 2014/24/EU, Directive 2014/25/EU (on

procurement by organisations in the utilities, transport, and postal

service sectors), and Directive 2014/23/EU on the awarding of

concession contracts (European Commission, 2018a).

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60 AHMARI & DAVIS

TABLE 1

Key Principles of EU Framework to Attain Value for Money

Principle implication

Transparency Advanced communication of procedures,

requirements, evaluations and awarding of

contracts

Equality Information is provided to the market at the

same time

Non discrimination Buying organisations cannot discriminate

against any supplier based on any factor

Proportionality The imposition of requirements and conditions

on bidders have to be reasonable

mutual-recognition Consider certificate from other countries

2.5. Value for Money and Public Procurement

Value for money is the main principle governing any system of

public procurement and supported through the underpinning

fundamentals: of, efficiency, effectiveness, Transparency

accountability and open competition (Commonwealth Procurement

Guidelines, 2005). Moreover, According to Kurakaew, Kokkaew, and

Suksuwan (2016), the fundamental goal of public policy is that

‘Public Private Partnership (PPP)’ should be based on providing value

for money (VFM) rather than conventional public procurement. VFM in

procurement involves ‘best price for given quantity and standard of

output assessed in terms of relative financial benefits’.

The procurement cycle starts with assessing potential sources of

supply against budget (economy), controlling and monitoring of

supplier performance (efficiency) and evaluation of outcomes against

the goals (effectiveness). Procuring authority can select buyer based

on price only or combination of price and quality (Most Economically

Advantageous Tender (MEAT) (Hlavacova, Heralova, & Matejka,

2014).

Furthermore, Hossain (2015) discussed that MEAT helps buyers

to evaluate observable terms such as cost, value, quality and saving

using both quantitative and qualitative criteria. The effectiveness

influences the outcomes of the project in terms of quality and on-time

delivery. Moreover, the lowest price is a common understanding of

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VFM and total cost of ownership. Total cost depicts the cumulative

costs incurred over the lifecycle of the product/service in use. The

procurement principles contribute towards the effectiveness of

procurement system and deliver best outcomes and better value for

money (Dimitri, 2013; Yaya, 2017)

2.6. Public Procurement Process

The process of public procurement began as a response to the

requirement for a more robust relationship between buyers and

sellers. This relationship was characterised by the demand for better

performance from suppliers, (such as, a reduction in lead time, a

reduction in stock levels, increasing flexibility, product

standardisation, product quality, feedback and so on) and the desire

to develop suppliers by fostering purchasing synergy to improve

product design, lead innovation, and engage early supplier

involvement. According to Khan (2018), public procurement process

starts with the identification of requirements and analysing how these

requirements can be met. After the procurement planning, the

contracting authority calculates the total value of the contract and

determine ‘threshold’ to ascertain procurement rules and regulations

are applied.

Figure 1 below depicts the procurement process and highlights

stages of the procurement system as well as the flow of information

through multiple stages of the procurement chain. In the final stage,

feedback is provided regarding improvements to product design,

innovation, and ensuring supplier involvement as we as enhance

buyers’ experiences.

Carbonara, Costantino, and Pellegrino (2015) explained that the

first step involves in procurement is project planning and preparation

of procurement documents. The next stage includes publishing the

tender- this generally involves some sort of call for tender and an

outline of the procurement process is published. The third stage

comprises announcement of the qualified supplier by buyer and

information request from suppliers. The next stage encompasses bid

delivery from the supplier, tender evaluation and award of the

contract. Stilger, Siderius, and Raaij (2017) added that the

preparation of contract documents is a useful source of information

that contract authorities provide to the supplier. The formulation of

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62 AHMARI & DAVIS

FIGURE 1

Stages of the Public Procurement System

tender invitation describes what is to be procured, requirements,

types of tender and procedures for evaluation. The publication of

tender notice ensures suppliers are invited or given information on

the tender. The contracting authority reviews the proposals to ensure

supplier meet the requirements. In the context of the award of

contract decision, authority decides to award the contract to the

suitable supplier (Korytarova, Hanak, Kozik, & Radziszewska-Zielina,

2015).

2.7. Public Procurement and the Use of Stakeholder theory

Studies have shown that public procurement field is theoretically

diverse, which implies that it is reflective of input from a wide range of

fields and disciplines. Therefore, public procurement is likely to be

characterised with different theoretical perspectives from diverse

academic backgrounds (Edquist & Zabala-Iturriagagoitia, 2012).

Research has also indicated that theories related to the economics

discipline have dominated most research articles in the public

procurement. Microeconomic theories are always predominant in the

field of public procurement (Alhazmi & McCaffer, 2000). For instance,

theories such as principal-agent theory, competitive auctions, and

bidding, as well as transaction cost economic theory are common in

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CHAPTER 3 63

almost half of the journal articles in public procurement (Edquist &

Zabala-Iturriagagoitia, 2012).

Freeman (1984) integrates stakeholder concepts into a coherent

construct that the role of stakeholders (i.e. consumers, producers,

suppliers) moves closer to the forefront of academic attention,

Consideration of stakeholders therefore forms an integral part of the

industrial planning process and the ‘sociology of technology’ where

achieving change in the supply chain is “…not simply a technical-

rational process of ‘solving problems’, it also involves economic and

political processes in articulating interests, building alliances and

struggling over outcomes” (Webster, 1995: p. 31). Stakeholder theory

has been depicted in 1984. Ever since then a continual development

has taken place through numerous academics adding to the

knowledge base, enhancing and testing the initial “theory”. Today

stakeholder theory holds a central place in management theory.

(Harrison & Hoek, 1999, p. 483) The main variables of stakeholder

theory comprise the organization or corporation, and its stakeholders,

which usually include but are not limited to employees, suppliers,

shareholder, customers, government, and competitors (Freeman,

Harrison, Wicks, Palmer and De Colle, 2010, pp. 16-17).

In this section stakeholder theory in public procurement is

discussed. Generally, stakeholder’s groups can be categorised as

regulatory, internal primary, external primary, and external secondary

(Wu, Chen, & Olson, 2014). Stakeholder theory within public

procurement suggests that there is great pressure from buyer to get

the best value for money and suppliers private company to win the

public award. According to Sarkis, Zhu, and Lai (2011) Stakeholders

exert pressure on companies to diminish negative effects. Moreover,

firms respond by developing and reconfiguring capabilities to gain

social legitimacy and performance improvement (Parmigiani, Klassen,

& Russo, 2011; Zorzini, HendryHuq, & Stevenson, 2015). In the

opposite of this, the social value creates opposition pressure on the

authority for value to be perceived. For example, public procurers are

always pushing for the lowest price, but the end users who are the

taxpayers are looking for highest quality they always have nothing to

do with cost. Also, procurement performance management seeks to

achieve the overall objective to satisfy internal and external

stakeholders (Pinto & Slevin, 1988). Additional evidence by Chan,

Scott, and Lam (2002) suggest that stakeholders’ involvement,

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64 AHMARI & DAVIS

operational measures and the like, are other criteria to be considered

towards the success of construction projects. Performance for

example can be defined as specific and clear goals reflecting values

for all stakeholders. Stakeholders are determinants of success

beyond system and process adoption (Orlikowski, 1992). From these

sense, stakeholders have seen as a lens to support this study.

III. METHODOLOGY

Neuman and Robson (2014) stated that comparative research is

useful to identify and explain the similarities and differences between

two or more events or scenarios at a broader level. Comparative

research plays an important role in the development of scenario or

events through analysis of cases. On the other hand, qualitative

research focuses on analysing the problem through developing social

meaning and emphasis on relationship important between the

researcher and case. Qualitative research is valuable for investigation

and observation into metaphor, descriptions and distinctiveness of

observed phenomena (Silverman, 2016).

According to Rihoux and Ragin (2009), qualitative comparative

analysis (QCA) is a case-based approach that enables the researcher

to identify direct contributions made by different factors that are

critical to access the outcome for given case. QCA starts with

documentation of various sources, conditions and events associated

with each observed case. It offers a nuanced understanding of issues

through presenting different combinations of factors that lead to

success and influence context. The analysis for this study is based on

interpretivism metatheory using the qualitative methodology and

case-oriented strategy (Woodside, 2010).

Qualitative comparative analysis (QCA) is case orientated because

it deals with the selected number of complex issues in a configuration

way. This depicts that each case is considered as a complex

combination of events and scenarios and a specific ‘whole’ and thus,

presenting a holistic perspective. The choice of outcomes and

conditions (variables) for the analysis that needs theoretically

informed. QCA can be used inductively to gain insight from case

knowledge to determine the key variables to be considered (Ragin,

2014).

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CHAPTER 3 65

For this study, secondary data is used to analyse and interpret the

procurement systems in Ireland and Saudi Arabia. Secondary data

analysis involves generating information through existing

interpretative information. The sources of secondary data include

reports, journal articles and official publications (Johnston, 2017).

IV. GOVERNMENT PROCUREMENT FRAMEWORKS – ANALYSIS

IRELAND AND SAUDI ARABIA

4.1. Countries Overview

Ireland’s procurement system has been assessed at the

European level with best practices in public procurement, which

accounted for 16% of the total GDP in 2017. On the other hand,

Saudi Arabia’s economy is one of the largest in the world; it has

moved from being 27th in 2003 to being the 19th largest economy,

totalling almost SR890 billion in spending in 2016. However, the

kingdom released a new program called the Saudi National

Transformation Plan (NTP) and the 20-30 vision, which is an

ambitious plan that aims to increase economic growth based on

diversity. Among these major goals is the need to double foreign

direct investment from RS 30 billion in 10 years and to adapt public-

private partnerships (PPPs), focusing on the public sector’s

expenditure and on transferring the responsibility to the private

sector.

Taking into consideration that these different countries have

different Gross Domestic Product (GDP) per capita which measures a

country’s economic growth; Saudi Arabia has a seemingly lower GDP

as compared to Ireland but prefers to use the traditional procurement

system of awarding tenders under the pretext of lowest price criteria.

In contrast, the Irish system focuses on the most economically

advantageous tender (MEAT) projected under EU regulation as its

executive procurement system despite it having a relatively low GDP.

Thus, the hypothesis established is that both the systems will result

to attainment of different outcomes but still provide value for money.

The legal framework for IRO and KSA is examines as follow

4.2. Legal and Procurement Framework – Ireland

The public-sector organisations are obliged to comply with

principles of competitive tendering in relation to expenditures for

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66 AHMARI & DAVIS

supplies, works and service contracts. In 2006, the law and

regulations were set for public procurement under regulations S.I 329

(2006) and implemented under the European Directive

(2004/18/EC). In 2013, Office of Government Procurement (OGP)

was established to reduce costs and deliver better value or money

through the reform of public procurement process.

The goal of OGP is to consolidate existing fragmented

procurement model with new centre-led structure by deploying

common processes, governance policies and system (Bovis, 2016).

The EU directive imposes a legal obligation on public bodies and use

of the objective tendering procedure for the contract values

threshold. The important aspects of tendering such as maintenance

of tender lists, advertising of contracts, receipt and opening of

tenders, tender timescales, confidentiality of information, evaluation

of tenders and debriefing of unsuccessful tenderers are managed

under EU directives. All tenders with a value of over 25,000 Euro

should be advertised on e-tenders (www.e-Tenders.gov.ie) and

request for tender is available at OGP website. The tender with a

value above EU threshold of 135,000 Euro sent to e-Tenders site of

European Journal (OJEU) and published on site for 3-5 days (Graellis,

2015).

At the national level, the Department of Finance has a ‘Green

Book’ that regulates public procurement that falls below the EU

threshold. This ‘Green Book’ sets out a number of sub thresholds that

regulates different levels of contract valuations. In Ireland, the

procurement system falls under the control of the Office of

Government Procurement (OGP), which is, in turn, looked after by the

Ministry for Public Expenditure and Reform (MPER). The main goal of

the OGP is to standardise the procurement process and maximise

savings by conducting public procurement in a systematic manner. In

addition to the above, the OGP also manages the central e-

procurement system, ‘eTenders’ (European Commission, 2018b). The

Irish national rules lay down a level playing ground for all suppliers to

pitch their contracts, to encourage true, competitive tendering.

4.3. Legal and Procurement Framework – Saudi Arabia (KSA)

Alhudaithy (2011) stated that the Ministry of Finance in Saudi

Arabia (KSA) has first published ‘Government procurement system’

under MAR/1977 and issued by Royal Decree No M/14. Firstly, the

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law defines the execution of state purchases and contract

performance of project (Procurement of government purchases and

project execution, Royal Decree no. M/14 dated 7/4/1397 H).

Secondly, the Tender and Auction regulations, Royal Decree no M/6

dated 24/2/1386 H. However, combined Government Tenders and

Procurement has replaced these laws. This includes Royal decree no

M/58 dated 4/9/1427 (27/9/2006) and regulations

implementation, Ministry of Finance No 362 dated 20/2/1428

(11.03.2007).

According to Ibn-Homaid (2005), in KSA, statuary law makes it

compulsory that government contracts should be fixed prices and

awarded through competitive bidding (Ibn-Homaid, 2005). The aim of

Saudi procurement system is to apply procurement principles such as

economy and efficiency, transparency, equality, accountability. The

separation of government and personal interest enhance

transparency among the vendors and thus, maximise value of money

through competition (BOECM, 2009).2

V. ACROSS CASE ANALYSIS

5.1. Case of Ireland

5.1.1. Tendering Process

Cunningham (2015) stated that Irish government requires

competitive tendering throughout the public sector and it is known as

‘an offer in writing to supply goods and services at a fixed price’. In

Ireland, the term two-stage tendering is used because, initially

contractors need to prequalify for the bid and then submit a bid for

the project (Hanak & Muchova, 2015). Under EU procurement rules

and directives, procurement procedures must come under one of the

criteria that are ‘open tendering’, ‘restricted tendering’, negotiated

procedure and competitive dialogue’. Open tendering enables the

interested company to bid for work and it generates the greatest

degree of competition (Stilger, Siderius, & Raaij, 2017). The tendering

arrangement involves advertising in trade journals or newspapers and

inviting the contractor to submit the bid. The open procedure,

commonly used and enable all parties to submit tenders. However,

this does not mean that all tenders will be evaluated because there

are minimum standards to meet in terms of business and financial

standing as well as technical capability. In open procedure, a single

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68 AHMARI & DAVIS

stage procedure is adopted and ‘Request for Tender (RFT)’ is

advertised on e-tenders (Bochenek, 2014).

On the other hand, selective or restrictive tendering involves

compiling the small list of suitable contractors favoured by the design

team or employer and suppliers invited to bid the project. The

contractor selection is based on rules and criteria for selection that

are made available to interested parties. The restricted approach

involves two-stage procedures. At first stage, the supplier is required

to provide details of technical and financial capacity. At the second

stage, the evaluation of response, the suppliers are issued with the

tender documents. Besides, competitive dialogue is used in

exceptional circumstances such as complex project, which requires

variability and flexibility from open or restricted projects (Reeves,

Palcic, & Flannery, 2015). Finally, in negotiated procedure under this

type of procedure, the buying organisation consults with its choice of

suppliers and negotiates the contract with them (Office of

Government Procurement, 2010).

5.1.2. Criteria for Contract Award

In 2014, the public procurement directive has replaced the

dichotomy lowest price v MEAT by the MEAT as the sole mandatory

rationale behind any award decision. The EU MEAT criteria in the

award procedure ensure public procuring authority can put more

emphasis on environmental consideration, quality, innovation or

social aspects while taking into consideration the account of life-cycle

costs and price of what good or service procured. The aim of MEAT is

to put an end to the dictatorship of lowest price and make a quality

central theme. Under MEAT, the awarding authority must specify the

particular factors chosen for the contract in question and descending

order of priorities. These factors must relate to specific contracts and

used for evaluation of tender. The list factors for economically most

advantageous criteria includes methodology proposed, quality and

level of resources, project plan, aesthetic and functional

characteristics, after sales services, technical merit and reliability of

supply (Lundberg & Bergman, 2017).

The pre-defined qualification criteria are used to select

candidates who are invited to submit a bid. The selection criteria are

based on financial, technical and economic standing as well as

professional ability. All requests for tender irrespective of contract

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value should outline set of qualification that is used to evaluate

tender received. For contract value below 25,000 Euro, it would be

sufficient to include the request for quote that the tender will be

evaluated based on price and following criteria (Bovis, 2016). The two

procurement evaluation conditions are

- Lowest tender price for contract with value below 5,000 Euros,

and

- Most Economically Advantages Tender (MEAT) based on specified

criteria including cost and qualitative criteria factors.

5.1.3. Evaluation Methodologies

The identification of qualified supplier through whittled down a

long list of suppliers for the contract is important. There are various

approaches for supplier selection. However, buyer has to make

number of decisions such as what quality criteria to include, how to

weigh each quality dimension, how to score each dimension, overall

quality score and how much weigh quality vs. price and lastly, formula

to combine quality score and price into one overall score, so that bid

can be ranked. The bid evaluation plays the critical role in

procurement because allows to determine what is the Most

Economically Advantageous Tender (MEAT) and address one aspect

of bid evaluation formula known as the issue of ranking paradox

(Hlavacova, Heralova, & Matejka, 2014).

The use of scoring rules to weight quality and price is common in

the EU and there are three ways to use MEAT. Evaluation of bid

through highest quality at a pre-defined rate, assigning a score to

both quality and price or evaluating quality in monetary terms and

then summing into these single score. Evaluating quality could open

the process up to corruption because procuring authority exercise

discretion in the selection process. In the procurement directives,

article 53 and 55 restrict the basis of discretion because evaluation

criteria need to explain beforehand (Faustino, 2017).

The evaluation is based on the weight of quality versus price has

to be considered an ultimate decision has to make the formula to

combine price and quality score into one overall score, so the bids

can be ranked. Quality criteria are prioritized and listed through

assigning weights to each criterion and then shown to the suppliers.

The quality scores are calculated as the weighted sum of the score

for each quality criteria. Only qualified suppliers can proceed from

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70 AHMARI & DAVIS

selection to qualification to selection stage and high score in one

criterion can compensate for a lower score in another criterion.

In the context of weightings and scoring system, the objective

evaluation of tender depicts that award criteria should be measurable

and thus, capable of quantifiable according to rules of the scoring

system. There are two approaches for bid evaluation known as

absolute and relative. The score calculation using absolute formula

depends upon quality and price of given bid. On the other hand, the

absolute formula for evaluation ignores information from submitted

bid as a reference point. The three quality criteria besides beside

price that can differentiate bid include Service level agreement (SLA),

Technical capacity and corporate social responsibility (CSR) (Siderius

& Raaij, 2015)

5.2. Case of Saudi Arabia

5.2.1. Tendering System

Alofi, Kashiwagi, Kashiwagi, and Sullivan (2016) described that

for contracting practices in KSA, National Economy and Ministry of

Finance has established a uniform Public Works contract Government

regulation, bidding procedure, general terms and conditions, dispute

and arbitration cost, financing and administrative policies and other

items are explained in the Public Works contract. The government

encourages the competitive bidding in order to give equal chance of

bidding for all contractors to bid and ensure to achieve the least bid

price.

Davis (2014) added that that under the Government Procurement

Systems, there are three different types of purchasing methods in the

government procurement system known as ‘direct purchases’, ‘public

procurement competitions’ and ‘specific purchases’. The bid is

submitted using two-envelopes that involve submission of price and

contractor justification. The range of factors that should be addressed

under procurement law includes

- The description of the procurement including outcomes and

specifications,

- The conditions for participation, direct contracting and listing of

participants,

- The evaluation criteria that will be used in the procurement

- The risk assessment and indicative time-lines

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CHAPTER 3 71

- Special considerations and conditions which belong to specific

procurement

- Financial arrangement for procurement process including value of

bid guarantee and price of request documents.

5.2.2. Criteria for Contract Award

In Saudi Arabia, the tender system is based on three stages that

are proposals submission, selection and proposal formulation. The

quality is assured through pre-qualification system and conservative

licensing. The pre-qualification system ensures a list of supplier or

companies with reputation is maintained. The tenders awarded based

on expert knowledge rather tender specifications. After the tender

opening, the factors such as specification, price and technical

capabilities are evaluated. Awards are made on lowest price along

with comments from committee opening the tender (Giunipero &

Flint, 2001). At the first stage, bidders submit a proposal on same

place and time. Second, documents are submitted along with the

financial security of 1-2% and thirdly, total price submitted in one

paper. However, primary security is not required in case of direct

purchases. The approval committee is made of manager and three

people as well as a member of a reserve. The committee is re-formed

every three years. In case of supplier failure to fulfil the contract with

specified date, the financial guarantee is not traced to the vendor (Al-

Hammadi, 2015).

Alhudaithy (2006) explained that the contracting public authority

performs pre-qualification process because there is no central

registration authority in KSA. The classification of the department of

Ministry of Municipal and Rural Affairs propose these classifications.

This includes classification related to entertainment, construction

work and catering and maintenance of public authorities. However,

this does not replace the pre-qualification process of tendering public

authorities. For the implementation of contracts, the Ministry of

Finance only accepts documents in Arabic. There are certain issues

with nature of contracts in Saudi Arabia that contradicts with

procurement principle of transparency and accountability (Saad,

2016). The government has expanded the use of unusual conditions

and purchasing law and provision, which empower the Saudi

government with privileges over the party. For example, the

government unilaterally rescind or modify the contract. The power to

extend or terminate the contract before the due date, perform the

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72 AHMARI & DAVIS

contract at the contractor expenses, penalise the contractors and

materials that are on the site to use to complete the work (Alhudaithy,

2011).

5.2.3. Evaluation Methodologies

The Ministry of public works classify the contractors based on

qualification and experience along with their financial position into

five grades license so that project is awarded to right contractor.

Apart from 5-grade contractor classification, there is no requirement

or procedure for bidding on public works except that bid must be

awarded to lowest bidder. The committee members review the

vendors’ proposal. If all provided proposals are expensive than

market prices, there are two ways to handle the situation. First, the

committee members negotiate with vendors and supplier with lowest

price proposal requested to reduce the price close to market price.

Secondly, if committee members fail to find the proposal close to

market price, then one of the project specifications are removed if the

removal does not affect the project (Yaya, 2017). After drawing up of

tender prices ranking, the opening committee sends the proposal to

evaluation committee that examines each tender to analyse and

evaluate that conditions and specification detailed in contract

documents are met. In case of differences with the market price,

procuring authority negotiates with tenderers to reduce the price or

change their reservations. The evaluation committee not allowed

negotiating any tender that does not conform to specifications and

conditions in contract document (Alofi, Kashiwagi, Kashiwagi, &

Sullivan, 2016).

VI. CROSS-CASE COMPARISON AND DISCUSSION

The procurement system in both countries is governed by

effective legal and regulatory framework as mention Table 2. In Saudi

Arabia, the public contracts are managed under Royal decree no

M/58 and regulations are implemented under Ministry of Finance No

362 directives. On the other hand, in Ireland, the public system is

managed and governed under national and EU procurement

directives. In Ireland, public procurement regulations S.I 329

managed the contracts and implementation of procurement are

managed under regulations implementation under European

Directive (2004/18/EC). There is no centralised authority or body to

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CHAPTER 3 73

managed and monitor the public contracts in the KSA. On the other

hand, Office of Government Procurement (OGP) in Ireland offers

centralised support to manage the public contracts. In Ireland, the

tender procedure includes open tendering, restricted tendering,

negotiated and competitive dialogue under the EU directives.

Conversely, the purchase types influence the tendering procedure. In

KSA Saudi Arabia has 3 main types of procurement systems, with

each system for special and unique items. Those systems are mainly

public procurement competitions, direct purchases, and specific

purchases

There are major differences exist in both systems in terms of the

procurement process. In Ireland, the tendering involves two-stage

process and their minimum standards to meet in terms of business

and financial standing and technical capability. On the other hand, in

the KSA, the contracting public authority performs pre-qualification

process because there is no central registration authority in KSA. All

qualified companies can bid however, bidding must be same place

and time along with document in Arabic as well as the financial

guarantee of 1-2% of total project value.

The criterion for contract award varies significantly in both

systems. In Ireland, most Economically Advantages Tender (MEAT)

based on specified criteria including cost and qualitative criteria

factors includes methodology proposed, quality and level of

resources, project plan, aesthetic and functional characteristics, after

sales services, technical merit and reliability of supply. Oppositely, in

KSA, approval committee makes the selection based on lowest price

and minimum two contractors are the must. In the final step the

contracts are awarded to lowest bid based on approval of authority

responsible for the tender process. Negotiations are made to get

better price bid.

The supplier evaluation and methodologies processes have major

differences. In Ireland, buyer has to make number of decisions such

as what quality criteria to include, how to weigh each quality

dimension, how to score each dimension, overall quality score and

how much weigh quality vs. price and lastly, formula to combine

quality score and price into one overall score, so that bid can be

ranked. The two approaches for bid evaluation known as an absolute

and relative method. In contrast, in KSA, the contracts authority still

relies on cost criteria without a significant prequalification process.

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74 AHMARI & DAVIS

Term and purchase labour contract and unit price and 5-grade

contractor classification for supplier evaluation.

Finally, under the Lowest Price system quality of the product or

service is given minimal considerations and the focus is on the price.

On the contrary, under the MEAT system, the selection committee

takes the price and quality into consideration when selecting the

awarding bid. However, the best value for money may not be

achieved simply by accepting the least expensive offer. Although the

initial purchase cost might be lower, the subsequent costs, mainly

operational and maintenance costs may be significant. In Ireland, the

Life Cycle Costing is used to some extent where each stage of the

process is evaluated to gauge a better understanding of the overall

costing of the project. On the other hand, in Saudi Arabia, the Life

Cycle Costing principle is given little consideration, due to the fact

that the tender is avoided to the lowest price bid. The subsequent

costs may be higher leading to budgetary overruns. Table 2 below

summarizes the comparative analysis of legal, processes, evaluation

and award criteria in both countries, Ireland and KSA.

TABLE 2

Comparative Analysis

Description Ireland Saudi Arabia

Legal

Framework

Member of (GPA) WTO

EU Directives

2004/18/EC

2004/17/EC

2009/81/EC

2014/24/EU

2014/25/EU

2014/23/EU

National Laws (OGP)

Not a member of (GPA) WTO

Royal Decree No.M/53 4

Ramadan 142/H/27 September

2006, Government Tenders and

Procurement Law

Implementation Regulations ,

Minister of Finance Decision No.

362, dated 20/2/1428H/10

March 2007

Procedures Opening tendering

Restricted

Competitive Dialogue

Negotiated

Single, Open, Limited

Negotiated

Direct purchase, public

procurement competitions and

specific purchases

Request for

Tender

E-Tender Electronic daily

and Official Journal of

European Union

Special invitations and

newspapers GAZET

E Tender 2016

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CHAPTER 3 75

TABLE 2 (Continued)

Description Ireland Saudi Arabia

Proces Pre-Tendering phase

Involves the preparation of the

project and preliminary

market consultation by the

contracting authority

Tendering Procedure

Determine whether the EU

Threshold is crossed.

Prepare Tender

documentation

Publish Tender advertisement

Evaluate expression of

interest

Notify Bidders of outcome

Award Contract

Contract Management:

execute, monitor and manage

contract

Proposal Submission Phase:

Announce pre-bid meeting

date, deadline and location

Receive the sealed

envelopes containing the

bids

Selection Phase

Evaluation committee

reviews offers

The lowest prices is

compared to the market

price

If the market price is still

lower than the tender bid ,

the lowest bidder is

negotiated with

Criteria for

Contract

Award

Most Economically

Advantageous Tender (MEAT)

based on special criteria

including cost, and qualitative

criteria including methodology

proposed, quality and level of

resources proposed, project

plan, aesthetic and functional

characteristics, after sales

service , technical and reliability

of supply

Selection based on lowest

price and a minimum of two

contractors

Contracts are awarded to

lowest bid based on

approval of authority

responsible for the tender

process.

Negotiations are made to

get a better price

Performance In 3 years OGP has successfully

saved in excess of €160 million

OGP reported that 66 % of the

public procure-ment was with

SME’s

OGP also pushed for the

progress of environ-menttal ,

innovative and social goals

through procurement

Difficulty maintaining the

competitiveness during the

tendering process

The length of the tendering

process is too long to stay

effective

Local firms are given

preference even if their bids

are up to 10% higher

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76 AHMARI & DAVIS

VII. CONCLUSION

The comparison and evaluation of Ireland and Saudi Arabia

procurement systems have highlighted interesting similarities and

differences. In case of Ireland, there is public procurement regulation

329 (2006) but the implementation and operations of public

procurement function are managed under EU directives. The tender

procedures include open, restricted and competitive as described in

the EU public procurement directives. The tender system is based on

competitive procurement and prequalification of the supplier is

important to meet minimum standards to meet in terms of business

and financial standing and technical capability.

The award criteria are based on the Most advantageous tender

(MEAT) and bids are evaluated based on qualitative criteria factors.

The scoring system is managed through either absolute or relative

approach that allows calculating the score for the supplier. On the

other hand, Saudi Arabia public procurement systems are governed

by Royal Decree no M/58. The approval committee makes the

selection decision based on lowest price and minimum two

contractors are must. The supplier evaluation is based on 5-grade

contractor classification and government use four types of contracts

to manage the project. In Ireland, the supplier evaluation is based on

MEAT, which presents quality and price evaluation paradox for award

committee.

Finally, clear that the quality and price awarding system has the

upper hand in public procurement as compared to the price only

awarding system. Considering the primary purpose of public

procurement is to enable a procurer to attain value for money, the

quality and price criterion thus stands to offer better performance for

a country which will consequently result not only in an increase in the

economic growth but also ensure value for money. The tendering

procedures are similar in both countries but supplier evaluation,

supplier evaluation and award criteria varies significantly. Finally, the

procurement system in Saudi Arabia will have to be changed to

incorporate additional elements, such as quality consideration and

easing regulations—especially for international companies who wish

to gain access to the Saudi market.

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CHAPTER 3 77

NOTES

1. According to the OECD (2009), approximately 8 to 25% of the

GDP of its members and 16% of EU countries are attributed to

public procurement.

2. Official Translation Department, Bureau of Experts at the Council

of Ministers, Riyadh.

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